Reduce Demurrage and Detention Charges with our New App Solution

Demurrage and Detention often weigh heavily on the balance sheets of companies. These charges are levied when shipping containers are held for prolonged periods (exceeding the agreed free time) inside or outside the terminal. According to a report published in 2015, 35% of all shipments in the US alone made losses as a result of Demurrage and Detention charges.

Demurrage charges are usually levied on a daily basis after expiration of the “free-time”, starting from the point when the container is unloaded from the ship, until it leaves the dock premises. Detention penalties occasionally take effect from the time the container exceeds the free time at the terminal, until it returns, empty. Poor visibility of container flows and the absence of a real-time tracking process for container movements and contracts significantly reduce supply chain efficiencies. The result is an increase in charges.

Free time is a major contributing factor towards increased costs. Poor utilization of free time can result in unwarranted costs of up to 25% of ocean freight shipments, according to one of the world’s biggest Non-Vessel Operating Common Carrier (NVOCC) . Prudent utilization of free time is critical and must be a part of every shipment routing decision, along with shipment all-in rate and transit time. Using available data for smart decision-making might seem practical, but the challenge lies in accessing this data in real time. At the same time, it is somewhat unrealistic to expect consistency in the data as most shippers run multiple carrier contracts simultaneously with no proper way to find and compare free time.

The Solution

Our solution to tackle this challenge is to put in place a process that calculates and provides real-time insights into the total expenses incurred due to Demurrage and Detention. The process must be able to track container flows and contents, and provide real-time visibility. This will allow supply chain companies and professionals to plan and prioritize their shipment activities effectively. Supported by the right technology, the intended solution must provide an organized approach to freight rates and contract management. This includes real-time workflows for accurately calculating rates and quotes, inclusive of free time.

The New Digital Solution

We have designed an intelligent application that tackles the issue of rising Demurrage and Detention charges, and in parallel aims to improve supply chain efficiencies.

This new digital solution is the brainchild of graduates from Damco’s 2016 International Graduate Program in Lima, Peru. The team of graduates, realized that there could be a digital solution to this problem that would help shipment companies save potentially millions of dollars globally. The team proposed an idea for a simple app that would automatically calculate the total cost of Demurrage and Detention, based on contractual information. It is estimated that this app could help save a million dollars in America alone which could translate into higher savings in other countries.

How Does This App Help?

It is an easy-to-use tool, which gives real-time insights into Demurrage and Detention status, down to the level of your product and SKU. The organized approach to freight rates and contract management in turn helps in tactfully mitigating Demurrage and Detention. It allows you to track and obtain clear visibility of container flows and contents so shippers can plan and execute shipments efficiently. It also validates the accuracy of carrier bills for Demurrage and Detention charges so you can determine if you’ve been overcharged.

Additional Benefits

Complete and real-time visibility into your containers’ free time and D&D charges leads to reduced costs and higher supply chain efficiency. The app integrates container visibility with your carrier contract data for fewer administrative activities. It intelligently sends proactive alerts of any potential costs, for timely decision-making. It also helps review contractual agreements for free time and cost per port, and recommends structural changes for your current supply chain set-up.

The app is first of its kind digital solution to tackle the problem of demurrage and detention charges globally. For more information on our Demurrage & Detention Management solution, visit our webpage here.

Mimi Sur is a Domain Architect for Supply Chain Products at Damco, based in The Hague. Mimi is a globally experienced, seasoned IT professional who has worked within high profile industries such as IT consulting, Fintech, and public sector, as well as for high tech startups. Mimi joined Damco in 2016 as part of the HQ Customer and Demand IT team. She has been engaged with building innovative, customer-centric, next gen supply chain solutions to meet the industry challenges following Agile methodologies. This includes design and development of the Demurrage & Detention app.

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